Retail giants enable trucker exploitation

10/31/2018

America's retail giants have spent a decade ignoring signs of labor abuse in their supply chains, sometimes fighting government efforts to crack down, even as thousands of truckers were driven into debt and poverty, a USA TODAY Network investigation has found.

Target, Costco, Hewlett-Packard and many others have benefited from California port trucking companies that forced their drivers into debt, made them work up to 20 hours a day and sometimes paid them pennies per hour.

Retailers and manufacturers rarely hire the truckers directly. Instead, they rely on a maze of subcontractors to move their goods and have paid little attention to who their direct vendors hire.

In the 1990s, similar abuses in overseas manufacturing operations led to a widespread crackdown by U.S. brands, which now scour through their production operations to weed out child labor abuses, forced overtime and debt-driven schemes that exploit workers.

But companies have made no such effort at the southern California ports, even after hundreds of truckers told regulators they were treated as modern-day indentured servants.

In fact, when lawmakers tried to pass worker protections ' a few aimed directly at helping port truckers ' retailers paid lobbyists up to $12.6 million to fight the bills, lobbying disclosure records in California and Washington, D.C., show.

U.S. brands and their lobbying associations opposed a bill in California that would have criminalized wage theft in low-wage industries and another that would have made it easier for truckers to recoup stolen wages.

They fought bills that would have converted port truckers to fully protected employees and others that would give state agencies more leeway to punish trucking companies with violations.

All the while, Los Angeles-area truckers, drivers who touch half of all imports sold in stores across America, were losing a fight of their own on the waterfront.

As the USA TODAY Network reported this month, at least 140 trucking companies around Los Angeles have been accused of improperly billing drivers for their own work equipment by calling them independent contractors instead of employees. Hundreds of drivers say they were coerced into truck lease contracts they didn't understand and found themselves $100,000 or more in debt to their employers, according to claims made to state regulators and in civil courts.

When drivers got sick or fell behind on payments, trucking companies fired them, seizing their trucks and tens of thousands of dollars they had paid toward buying them.

Faustino Denova, a Mexican immigrant with a sixth-grade education, said he regularly worked 19-hour days but still went broke trying to pay off the truck his bosses promised him. In the worst weeks, he made so little that he owed money on Friday.

"I wasn't able to cover the expenses," he testified in 2015 in a California case at the Department of Industrial Relations' enforcement arm, known as the Labor Commissioner's Office.

Lawyers and executives with port trucking companies denied widescale labor abuses and said the more than 1,100 drivers who have filed court and labor commissioner complaints represent a minority of truckers. They also say the allegations have been overstated, part of a Teamsters union organizing campaign against the industry.

When he first came to the U.S. in 1989, Gregorio Ramirez spoke only Kanjobal, a Mayan language from Guatemala. He worked for four port trucking companies in five years, each time signing a lease-to-own contract he couldn't read and didn't understand.

Ramirez told reporters about a day in 2013 when he started driving at 4 a.m. for Atlantic Island Drive Away. More than 15 hours later, he found the parking lot where he was required to leave his truck at the end of the day barred shut. With no way to park and go home, he kept working, long past the federal time limits imposed on commercial truck drivers.

"And they wouldn't let you park until maybe 9 or 10 at night," Ramirez said. "There were several times I did think of calling the police. But I have kids and I have responsibilities. I didn't want to risk my job."

At the time, he lived in a studio apartment with his wife and four children.

In 2014, Ramirez, now 53, developed a benign brain tumor. Unable to see, he was suddenly out of work and the family was without money.

His wife worked double shifts cleaning offices and sewing dresses in a garment factory. His older kids started working too. But they still had to get groceries from food pantries.

The president of now-defunct Atlantic Island Drive Away did not respond to multiple requests for comment.

No law requires retail companies to police their vendors or the subcontractors those vendors hire. And unlike with overseas manufacturing plants, there has been no public pressure to force a cleanup of the shipping industry.

That makes it easy for the companies to look the other way, said David Weil, who led the federal Wage and Hour Division under President Obama.

"Not my problem, not my workforce," said Weil.

It was a series of high-profile revelations that led to more oversight in overseas manufacturing operations, according to Shawn MacDonald, CEO of the international research firm Verit, which produces labor and logistics studies commissioned by the federal government.

But workers involved in shipping deserve the same protection from the big companies that rely on their labor, MacDonald said.

"They've just never thought about this," he said, "let alone done any due diligence."

No Comment

Reporters contacted two dozen retailers whose goods were moved by port trucking companies accused of labor violations.

Seventeen declined to comment or did not respond to multiple interview requests; the rest sent brief statements about their corporate responsibility policies.

High profile customers

Through a maze of subcontractors, port trucking companies accused of labor violations have moved goods for some of America's most beloved brands.

There are 81 drivers alleging violations by Total Transportation Services.

$2.7 Million has been awarded to 27 drivers.

Total Transportation Services has moved goods for Home Depot, J Crew, LG, Ralph Lauren and Target.

"I wanted to let you know we aren't going to be able to help with this story," Nike spokesman Greg Rossiter said in an email.

"Regretfully we are not able to provide a response at this time," Costco's Muriel Cooper wrote.

Walmart, the biggest importer in the country, said in a statement that it expects contractors 'to act with integrity and in compliance with the laws.'

"The safety and well-being of workers across our supply chain is important to Walmart," spokesman Kory Lundberg said. He did not describe specific efforts by the company.

Only Goodyear said it took immediate action. Spokesman Keith Price said in a statement that the tire giant dropped Pacific 9 in 2015, 'within two weeks' of California labor commissioner decisions in favor of dozens of drivers. Pacific 9 denied committing labor violations.

Other retail companies consider the problem out of their hands.

LG Electronics is the eighth-biggest importer in the country, according to the Journal of Commerce, a shipping trade publication. The home appliance giant said it doesn't hold itself responsible until products are inside company-owned warehouses.

"We're not trying to wash our hands of this issue," spokesman John Taylor said in an email, "but it's frankly far afield" and "really very disconnected from LG Electronics."

Skechers shoes spokeswoman Lara Diab declined to comment because the company is 'unaware of labor or environmental violations by any trucking company at the port.'

But for years, union organizers have picketed at Skechers locations and sent executives letters alleging poor working conditions at their port trucking contractors.

A 2015 investigation by the National Labor Relations Board found that Skechers contractor Green Fleet Systems had condoned assault on drivers who talked to union organizers. One Green Fleet trucker was beaten in the parking lot.

Officials at Green Fleet Systems did not respond to multiple requests for comment.

Target leads the way

In 2008, California sparked the labor problems at the ports of Los Angeles and Long Beach by banning older trucks from entering the harbor.

Companies suddenly faced the prospect of replacing 16,000 aging big rigs with newer, cleaner trucks.

To avoid the $2.5 billion price tag, the port trucking industry launched a lease-to-own program that pushed the cost onto truckers, most of them independent contractors who had to cover their own expenses. Trucking companies arranged to finance their fleet, then passed on the cost of each truck to an individual driver.

It didn't take long for retailers to embrace the extraordinary solution and then tout it publicly.

"Innovative and cost-effective," JCPenney said in a press release in December 2008.

A California retail lobbyist representing Home Depot, Nike and others called it a "resounding" success in congressional testimony in 2010.

One truck financing executive likened the cleanup to 'landing on the moon.'

Few brands were more public about their support than Target, the country's second-largest importer of container goods.

In October 2013, Total Transportation, one of the busiest trucking companies working the Los Angeles ports, threw a party to celebrate the success of its lease-purchase program. A driver and his father had recently completed the program by working double shifts for four years.

"Because we do not work directly with the trucking companies, but rather through the Association of Home Appliance Manufacturers, we are unable to comment."
MARY WESTIN, BISSELL
Local politicians and other trucking executives huddled under white tents and ate sandwiches.

Representing Target was Rick Gabrielson, then a senior manager for import transportation.

Gabrielson went on camera for a marketing video and praised Total Transportation, which moved containers for Target as well as for J.Crew, Ralph Lauren and LG Electronics. He called the lease-purchase program a 'three-legged stool,' a team effort between retailers, shippers and the truck drivers.

Gabrielson had delivered a similar message in a letter to Congress three years earlier, calling the arrangement 'efficient' and 'mutually beneficial.'

After the lease program rolled out, Target named Total Transportation an 'Outstanding Partner' and sent management a letter congratulating its 'commitment to supporting Target's core values and driving efficiencies throughout Target's supply chain.'

At the time of the party, 44 drivers had filed state labor commissioner claims against Total Transportation, alleging they had been coerced into signing lease-to-own contracts and cheated out of fair pay.

Total Transportation owner Vic La Rosa denied drivers' claims and said the program was designed to help them.

"The trucking companies stepped in and sponsored a lot of these drivers," he said, noting that workers have completed the lease program. "No good deed goes unpunished."

Target and Gabrielson, who began working at Lowe's in August 2014, declined to comment.

"Target doesn't have anything to share here," spokeswoman Erika Winkels said in an email when first contacted by a reporter in March.

Thursday, as this story was being prepared for publication, another company spokeswoman, Jenna Reck, contacted the USA TODAY Network to make additional comments. She said Target still uses Total Transportation but had previously taken steps to improve conditions for drivers, including paying them for time spent waiting at the port to pick up loads.

"The mistreatment of workers within our team, vendors, suppliers, or anyone that does business with Target is unacceptable," Reck said.

Fighting Back

Moving goods across the ocean to a store near you is a complicated process that can involve many companies. Here's how one thing ' a teddy bear ' might go from the factory floor to the checkout line.

  • A toy company pays $600 for a shipping container of teddy bears from Hong Kong.
  • The manufacturer pays a Chinese trucking company $200 to deliver containers to port.
  • A retailer pays a shipping company $1,800 to take them across the Pacific to the Port of Los Angeles.
  • The shipping company pays a port trucking company $800 to get them to a retail warehouse an hour or two away.
  • The retailer pays a long-haul trucking company as much as $3,000 to deliver boxes of teddies to stores nationwide.

These simplified steps and figures are based on a typical shipment, calculated with the help of American Export Lines, a worldwide logistics company.

At the same time corporations touted success, unions and workers rights groups began warning lawmakers about the 'foreclosures on wheels.'

Barry Broad, a labor lawyer and union lobbyist in Sacramento, said he has tried for years to shift the burden of cleaner trucks back to the companies instead of the drivers.

"Anybody could have told them if you mandate a driver pay for this tech (the clean trucks), and they don't earn enough, then the system isn't going to work," Broad said.

Broad and others have sponsored several failed bills to try to protect drivers, including a measure to convert truckers to employees instead of independent contractors.

From the beginning, retailers and port trucking companies were ready to fight such measures as they came up.

As the clean-truck program rolled out, Target's Gabrielson co-founded a lobbying organization, the Coalition for Responsible Transportation, to steer policy while regulators decided the rules for clean trucks. Home Depot, Nike, Walmart and Best Buy were some of the first members.

Over the next five years, the coalition and its parent organization, the Retail Industry Leaders Association, fought port trucking-specific bills that would have converted California drivers to employees, given cities the right to regulate port trucking and held retailers themselves liable in civil cases that workers brought against their vendors. Big-business opposition and Republican lawmakers argued that the regulation would kill jobs.

Coalition for Responsible Transportation

  • Target
  • Hewlett-Packard
  • Lowe's
  • Walmart
  • Hanesbrands
  • Home Depot
  • JCPenney
  • Best Buy
  • Converse
  • Gap
  • Nike

The Coalition for Responsible Transportation, a lobbying group of retailers, shippers and trucking companies, helped promote the lease-to-own program.

The website is now down, but these are some of the companies that have been affiliated with the coalition over the years.

Senate Bill 588, a lien measure to help officials collect penalties from port trucking owners, was "watered down to worthlessness," said Matthew Sirolly, a lawyer at the Wage Justice Center who helped write the bill largely in response to abuses reported in port trucking.

Another bill, which would have criminalized wage theft in port trucking and other low-wage industries, lost its teeth before passing in 2012.

Walmart itself spent as much as $500,000 " along with $1 million more from the California Retailers Association " on lobbyists who courted state lawmakers while they removed language that would have guaranteed criminal penalties for egregious wage theft.

Gabrielson's coalition had a powerful partner in the Retail Industry Leaders Association, which the coalition's president, James Jack, said 'signs the checks' for all state lobbying efforts. Gabrielson and Jack pushed for retailers to fight similar federal bills in Washington.

Jack said he wasn't familiar with the labor abuse allegations catalogued in the public record against the port trucking companies he represents in Sacramento.

Since 2010, about 60 companies, including several trucking members of the Coalition for Responsible Transportation, have lost cases at the labor commissioner or in civil court, where they were found to have misclassified drivers as independent contractors and cheated them of fair pay with the lease-to-own contracts.

Many of those trucking companies appealed labor commissioner rulings to civil court and later settled with drivers without admitting wrongdoing.

Jack said retailers promoted the lease program because they considered it a best practice. 'We never really anticipated the legal implications of the program.'

"Unfortunately," he said, "it was not as successful as we had hoped."

When a reporter pointed out in November that the coalition still promotes the lease program online, along with a how-to guide for how to install it, Jack said, "Maybe that should come off of the website."

The coalition's website was taken down earlier this month.

Double Standard

Retailers' response to the port trucking situation stands at odds with the public image of corporate responsibility the industry has tried to cultivate for years.

Target stopped importing rugs made with Indian child labor and clothes from sweatshops in Uzbekistan. Costco and Walmart police their Thai seafood sources for slave labor.

For many years, Nike benefited from sweatshops in countries that banned labor unions. After a series of expos's and protests in the 1990s and early 2000s, the sports apparel company developed a code of conduct and now spends millions every year making sure its foreign vendors adhere to it.

Now Nike conducts hundreds of overseas audits of its factories each year, a type of ethics enforcement adopted by other big retailers, including Polo Ralph Lauren, Home Depot, Neiman Marcus and JCPenney.

But they haven't held American trucking companies to the same standards.

Take Home Depot, the third-largest importer in the country behind Target and Walmart. Home Depot also moved containers through Total Transportation Services, the trucking company that helped create the lobbying coalition with Target. Home Depot either hired Total Transportation directly or it paid another company that used it as a subcontractor.

Home Depot spokesman Stephen Holmes said his company no longer does business with Total Transportation, though the change was not related to labor abuse allegations.

"We require all of our vendors to abide by any regulations and fair work practices," he said, citing Home Depot's "extensive audit program."

The audit program does not extend to the port trucking companies.

But since the USA TODAY Network reported on labor abuses earlier this month, Holmes said, "We're investigating this issue directly with carriers."

Experts say the apparent inconsistency between overseas policy and stateside inaction is troubling but not surprising because the spotlight hasn't been on American companies.

"It's not on their radar screen to monitor their supply chain here," said Verit's Shawn MacDonald.

"People assume the problems aren't here, but obviously they're here too."

By Brett Murphy

Source: USA Today